ANMI. Watch out! Your Gap is Showing

1. Dr. Prashanto Banerjee <drprashantobanerjee@gmail.com>
ANMI. Watch out! Your Gap is Showing
Dr. Prashanto Banerjee <drprashantobanerjee@gmail.com> Sat, Jan 12, 2019 at 9:24 AM
To: presi.sec@anmi.in
Cc: chairman@sebi.gov.in, gmahalingam@sebi.gov.in, madhabi.buch@sebi.gov.in,
skmohanty@sebi.gov.in, anantab@sebi.gov.in
ANMI. Watch out! Your Gap is Showing
January 12, 2019
To
Mr. Rajesh Baheti
President, Association of National Exchanges Members of India
Office No. 202, Star Hub Building No 1,
Behind ITC Maratha Hotel, Sahar Road, Andheri (East),
Mumbai – 400 059
ANMI. Watch out! Your Gap is Showing
Dear Sir,
A big shout out to the Association of National Exchanges Members of
India (ANMI). It has been very very busy recently. What with organizing
its annual international convention and simultaneously readying to
raise money to defend some of its members caught with market
malpractices.
Here’s a reality check – ANMI – an agency aiming to attain self-
regulatory organisation (SRO) status does not behave thus and it ill
behoves an SRO to conduct itself thus.

2. The dope is that Securities and Exchange Board of India (SEBI),
Economic Offences Wing (EOW), Mumbai Police and Serious Fraud
Investigation Office (SIFO) are investigating few big brokerage houses
for having indulged in serious market violations on NSEL.
Transgressions like false assurance with wrongful and misleading
statements leading to enticement for investors; deliberate lapses in
clearing and forwarding functions; market capturing practices by large
scale client code manipulations; short selling on the exchanges;
suspicious transactions of funding through multiple accounts; illegal
funding through NBFCs, etc were found which are now the subject of
investigations.
Brokers with reach and influence at ANMI are trying to camouflage the
issue as an industry play. They want to hide behind their association,
hinder the investigative process and protect themselves from further
inquiry and possible actions. Reading the tea leaves, it appears near
certain the action will be strict and severe. Why should the smaller
sized brokers be party to a dispute of limited interest to the association
as a whole? Why should the association protect the wrong-doings of
some of its select brokers?
A recent circular issued by ANMI in conjunction with BSE Brokers’
Forum clearly violates the stated principles of any SRO. It shows ANMI
in bad light – that of a close club of brokers with interest only to
protect the self-interest of some. It comes out as an association keen to
protect a few of its members, even when found to have committed
gross regulatory breaches. Instead of looking at ways to step up their
self-regulatory prowess, ANMI is being partisan showing absolute lack
of commitment towards a dispute resolution process and solving
investor problems. To add to it, ANMI is trying to coerce members to
contribute to provide legal assistance for members under
investigations by SEBI and other enforcement agencies. It is considering
intervening and judicial process in support | favour of the influential
brokers. Today, ANMI is crowd-funding to protect these few top

3. brokerage houses involved in malpractices on NSEL. Will ANMI resort
to a similar crowd-funding exercise to protect over 62 brokers who are
involved in the Rs 50,000 crore NSE Co-location scam?
An earnest suggestion to ANMI - if it wants to gain the status and
respect of an SRO then first and foremost what it needs to do is show
concern towards investors interests and demonstrate a zero-tolerance
policy to market abuses even by its members. It needs to illustrate by
attitude and action that it is firm and committed to clean up the
industry, make it safer for investors, win the trust and confidence of
the regulators and investors and ensure that the market grows
stronger and transparent. An integral part of an SRO’s rule making is
showing brokers the mirror when it has abused guidelines. ANMI
should turn passionate about its investor education programme,
review it and introduce a program for investors to check on their
broker and their track record on market integrity.
Compare and contrast this to how SROs in securities industries globally
are organised and conduct their operations (table below). One can find
that while the thrust and focus is for the promotion of growth of
intermediaries and development of markets there is no compromise on
enforcement of market discipline. For instance, FINRA, USA recently
took on mighty financial institutions like Morgan Stanley with a fine of
$10 million for failure to observe the anti-money laundering
programme and Merrill Lynch with a sanction of $6 million for mis-
selling of IPOs. It even went to the extent of penalizing a crypto broker
for deviance in market conduct.
Is ANMI, either on its intent or aspirations, anywhere close to this?
Possibly a pertinent theme for its forthcoming convention.
I have enclosed below a comparative chart of world’s leading SROs for
your perusal.

5. Thanks and Regards,
Yours Sincerely
Dr. Prashanto Banerjee
Cc:
1) Shri. Ajay Tyagi
Chairman, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
2) Ms. Madhabi Puri Buch
Whole-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
3) Shri. G. Mahalingam
Whole-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
4) Shri. N. S. Vishwanathan
Part-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
5) Shri. Arun P. Sathe
Part-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051